Passive income: 15 ways to let the money flow in

3

For many people, toiling for a living isn’t fun.

There can be lengthy commutes, dress codes, annoying coworkers, unreasonable supervisors, taxing physical labor, insufficient vacation time, heavy workloads, and a lack of appreciation, among many other things.

Thus, it’s easy to dream of money just arriving, without our having to clock in to earn it. Fortunately, passive income streams don’t have to be a dream. There are many sources, with examples including REIT dividend income, residual money, real-estate investments, interest, and other income-generating assets. Here’s a look at 15 of them — see which opportunities could work for you.

red mailbox stuffed with hundred dollar bills that are almost spilling out

1. Stock dividends

One of the simplest ways to enjoy passive income streams is to buy stock in healthy and growing companies that pay dividends. Better still, look for dividends that have been increased regularly at a good clip (many companies often hike their payouts annually) and that have room for further growth, as evidenced by a dividend payout ratio of around 70% or less. The payout ratio is the amount of the annual dividend divided by the trailing 12 months’ earnings per share. It reflects the portion of earnings being paid out in dividends. The lower the ratio, the more room for growth. A ratio above 100% means the company is paying out more than it earns, which isn’t too sustainable. Here are some examples of stocks you might consider and research further:

Stock

Recent dividend yield

AT&T

5.3%

National Grid

5%

Duke Energy

4.5%

Verizon Communications

4.5%

Pfizer 

3.7%

Flowers Foods

3.5%

General Motors 

3.4%

China Mobile 

3%

Data source: Yahoo! Finance.

2. REIT dividends

Another kind of dividend to collect is from real estate investment trusts, or REITs. They’re companies that own real-estate-related assets, such as apartments, office buildings, shopping centers, medical buildings, storage units, and so on — and they are required to pay out at least 90% of their earnings as dividends. They aim to keep their occupancy rates high, collect rents from tenants, and then reward shareholders with much of that income. If you’re interested in real estate as a way to make money, check out these examples of REITs to consider as investments:

REIT

Property focus

Recent dividend yield

Iron Mountain

Document storage

6.6%

Welltower 

Healthcare

5.9%

Realty Income 

Retail

5%

Public Storage

Storage units

4.1%

Host Hotels and Resorts

Hotels

3.9%

Digital Realty Trust

Data centers

3.5%

Data source: Yahoo! Finance.

3. Stock appreciation

Another way to wring income out of stocks, even if they don’t pay dividends, is to buy stocks that you expect will appreciate in value over time and then, when you need income, sell some shares. If you have a fat portfolio of such stocks when you retire, you might sell some shares every year to create a cash stream for yourself. Studying and choosing the stocks that will perform very well for you is easier said than done, though, so if you don’t have the interest, skills, or time to become your own stock analyst, consider simply investing in a low-fee broad-market index fund or two, such as one based on the S&P 500. Here’s how much you might accumulate over several periods if your investments average 8% average annual growth:​